The Impact of Compensation on Employee Performance in Commercial Banks in Kigali City, Rwanda

Abstract

This study investigates the impact of compensation on employee performance in commercial banks in Kigali City, Rwanda. The banking sector plays a crucial role in Rwanda's economy, but there are concerns about employee motivation and high turnover intentions. The study aims to examine the relationship between various compensation components (monetary incentives, health insurance benefits, transportation benefits, and professional development opportunities) and employee performance. The research employs a descriptive research design with both descriptive and explanatory components, using a quantitative approach. A sample of 180 employees from 10 commercial banks in Kigali City was selected using stratified random sampling. Data was collected through a structured questionnaire and analyzed using descriptive and inferential statistics. The findings reveal that monetary incentives and health insurance benefits have the strongest positive correlations with employee performance, while professional development opportunities are rated poorly and have the weakest impact. Overall compensation significantly influences employee performance, with the multiple regression model explaining 69.4% of the variance. The results align with Maslow's Hierarchy of Needs and Herzberg's Two-Factor Theory, emphasizing the importance of addressing both basic and growth needs. The study the understanding of compensation's impact on employee performance in the Rwandan banking sector and provide valuable insights for banks and policy makers to enhance motivation and retention strategies.